Sunday, September 8, 2013

WSJ: The perils of a carbon tax and other lessons from Down Under

The perils of a carbon tax and other lessons from Down Under.

WSJ.COM 9/8/13: For more than a decade Australia had one of the world's most successful center-right governments, and on Saturday it voted overwhelmingly for a restoration. After six years of Labor Party melodrama and leftward economic policies, Australians returned a Liberal government to power under new leader Tony Abbott. There are lessons here for conservatives in the U.S. and Europe.

One lesson is to beware the faddish politics of climate change. Labor won a majority in 2007 at the height of the global elite's drive to impose cap and trade and other anticarbon policies. New Prime Minister Kevin Rudd, who had campaigned claiming to be an economic conservative, quickly moved to pass a windfall-profits tax on mining companies and a carbon tax in the name of doing something about global warming.

The first Liberal leaders in opposition went along, much as John McCain and many American Republicans were inclined to do. Mr. Abbott challenged Liberal leader Malcolm Turnbull in opposition to the emissions-trading scheme in 2009, narrowly prevailed to lead the party, and went on to make a public and populist case against the new taxes. Mr. Abbott made the carbon tax such a political liability that Mr. Rudd pledged to throw it out when he returned as Labor leader earlier this year.

A carbon tax is one of those ideas that economists love to propose but that turn out to be lousy politics. If Republicans want to toy with the idea, they had better be prepared to eliminate the income or payroll tax along with it. Otherwise voters will figure out that the politicians are merely looking for one more way to tap into their incomes, in this case by raising their electricity and other energy bills.

Another lesson is that voters are looking for leaders who believe in something. Australia's media like to make fun of Mr. Abbott for his malaprops and social conservatism, but he refused to apologize for his views and made a notable contrast with Mr. Rudd's rudderless philosophy.

Mr. Abbott also ran hard on restoring the Australian economy to its pre-Labor vigor. This won't be easy because the country depends so heavily on mineral exports for growth, and the world commodity boom of the last decade seems to be ending.

This will put a premium on other pro-growth policies, in particular restoring the labor-market reforms that passed under the previous Liberal government and made it easier to hire and fire workers. Mr. Rudd repealed them, and the number of strike days has since doubled. Ford Motor announced in May that it will stop making cars in Australia after 90 years due in part to labor conditions, a blow to Australian morale that will also cost thousands of jobs in parts suppliers and other auto-service companies.

On foreign policy, Mr. Abbott is likely to continue Australia's pro-American tilt of recent decades. The country knows it is a Western island among rising and populous Asian powers like China and, eventually, Indonesia. The Labor government agreed to a U.S. Marine base in Darwin on the northern coast that has bipartisan support in Sydney.

Much of the West has careened to the statist left since the 2008 financial panic, the U.S. included. Australia had a dalliance with that fate but is now pulling back. The center-right politicians of America and Europe could do worse than ask Mr. Abbott how he did it.